Before understanding challenges in account receivable or sales process we need to understand activities in sales process:
Activities in sales process:
Sales team connects with customers and negotiates sales terms & price.
Once order is received from customer, material department has to check if inventory exist to meet order. If material is not available, goods are either procured externally by purchase department or produced internally by production department.
(Material department issues material to production department so that finished goods can be produced to meet order).
Logistics department arranges for transportation of finished goods to customer’s delivery address.
Bill is sent to customer. Customer does the payment. Finance department takes care of financial accounting.
In entire process, people from different departments (sales department, material department, production department, logistics department, finance department) need to coordinate with each other to ensure that goods are delivered to customer as per sales order.
How SAP SD overcomes challenges in sales process?
SAP enables tracking of activities and proper coordination between departments
Start of an activity by a department may depend upon completion of some activity by another department. Example, loading of goods on truck can happen only after picking & packing of goods, transportation department can dispatch goods for delivery only when goods are loaded on truck, finance department can recognize sales and record revenue in account books only when bill is issued to customer.
Hence activity performed by various departments need to be tracked properly. For proper coordination between departments, information needs to be shared between departments on time. This will ensure company does not lose time on coordination between various departments. Hence time consumed in completing sales cycle will reduce leading to faster business, better customer satisfaction and more sales.
Sap enables better coordination between departments. SAP SD module is nicely integrated with SAP FI & SAP MM.
SAP enables automation of task to reduce manual error:
To keep track of activities performed by various departments, each activity needs to be documented properly. Example: Picking, packing, loading & dispatch of goods need to be documented.
When goods are dispatched for delivery, then material department needs to document decrease in inventory and finance department needs to record cost of goods sold (COGS).
Finance department needs to record sales in account books when customer is billed.
Finance department needs to reduce accounts receivable when customer makes the payment.
Sap reduces probability of manual error (occurring due to manual intervention) by enabling automatic generation of documents.
SAP enables better visibility on inventory, sales order status, account receivables
As soon as goods are dispatched, reduction of inventory is documented. Hence information about inventory is available as and when needed.
Since all activity in sales process is tracked hence better visibility on sales order status.
Sap enables better tracking of account receivable. Reports for pending payment from specific customers can be fetched and this can be used to follow up with customer for payment.